The intraday effect of nature disaster and production safety accident announcement based on high-frequency data from China’s stock markets

Ping Li, Huailin Tang and Jingchi Liao

China Finance Review International, 2015, vol. 5, issue 3, 277-302

Abstract: Purpose - – The purpose of this paper is to investigate the intraday effect of nature disaster (external inevitable factor) and production safety accident (PSA) (internal factor regarding management level) announcement on stock price in China’s stock markets. Design/methodology/approach - – Using high-frequency data, this study adopts event study method to examine the intraday abnormal returns as well as the volatility of stock price before and after the announcement of nature disaster and PSA. Findings - – First, both nature disaster announcement and PSA announcement produce negative effects on stock returns. However, there are some differences in effects between the different types of announcement. Second, it is just within the event day (announcement day if trading day, otherwise the first trading day after announcement) that the volatility of stock price is distinctly increased by the two kinds of announcement. Third, there are some differences in the impacts of nature disaster announcement on firms in different industries. Finally, there are also some differences observed between the impacts of PSA announcement on chemical firms and other firms. Originality/value - – It is the first time that using high-frequency data to analyze the intraday impact of nature disaster and PSA announcement on stock short price behavior. The results can help us to understand the role of market microstructure playing in the process of stock price formation, especially the stock price movements before and after disaster and accident announcement and the sensitivity to the announcement. The empirical results have important implications for investors when making trading decisions, and for market regulators when setting trading rules.

Keywords: High-frequency data; Intraday returns; Nature disaster; Production safety accident; Realized volatility (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eme:cfripp:v:5:y:2015:i:3:p:277-302

DOI: 10.1108/CFRI-08-2014-0046

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